Tax Audit: IRS Red Flags

One of the biggest fears every American has is a tax audit. While the truth is that you are unlikely to experience a tax audit, it could happen. And there are a few IRS red flags that can increase the chances of a tax audit. Here are some things to avoid when preparing your tax return:

1. Handwritten returns. Instead, consider having a professional prepare it. Or use software that fills the numbers in for you.
2. Round numbers. Do not round up. Do not round down. Use exact numbers. Round numbers are among the major IRS red flags. $179.96 should never be $180.
3. Excessive expenses. If your expenses total half of your income or more, IRS red flags start going up. You are likely to be investigated to determine how you have so many expenses. If you had an unusually high loss for some reason, document it, and include copies of the documentation with your tax form.
4. Working from home. Watch out for home office related expenses. If you get too carried away, you could end up with a tax audit. Keep good records so that you have all the documentation you need.
5. IRS provided label. This just gets you in the system faster. Same with electronic filing. The earlier you are in the system, the more time the IRS has to ponder your red flags.

You can get more information about filling out your tax return by visiting the IRS Web site.